The G7 and Allies struggled to set a ceiling on Russian oil prices

Long-running talks by the United States and pro-Ukraine allies to cap Russian oil prices collapsed on Wednesday after a meeting of top European Union diplomats ended without agreement on a precise price and other details.

The plan is nearing completion and must be met before the EU embargo on Russian oil imports kicks in on December 5.

EU diplomats from all 27 member states met late on Wednesday to hammer out the final details, including at what price the cap should be set.

They could not reach an agreement because their views on exactly where the price should be set were too far apart, and some countries wanted further changes to the policy. It was not immediately clear when they would reconvene to begin talks.

At issue is a complex and strained effort by Ukraine’s allies to limit revenues from the Kremlin’s oil exports while averting fuel shortages that would push up prices and exacerbate a worldwide cost-of-living crisis.

EU ambassadors representing the 27 member states have been asked to set a price between 65-70 dollars per barrel and to approve the application methods with a soft touch.

The benchmark for the price of Russian oil, known as the Urals blend, traded between $60 and $70 a barrel a year before the pandemic. It rose to $100 a barrel shortly after Russia invaded Ukraine in February, but has settled between $65 and $75 a barrel in the past three months. This week it traded at the lower end of that range.

A senior Treasury official said on Tuesday that the coalition was expected to announce the price in the coming days, and the United States suggested it was not trying to influence price negotiations with the European Union. The price is likely to change over time, based on regular research that takes into account changing market conditions.

Despite delays in setting the price, G7 countries are trying to prepare energy market participants for how the price cap will work. It would place the burden of enforcing restrictions and monitoring on the businesses that help sell the oil: global shipping and insurance companies, mostly based in Europe. According to maritime data, most of the tankers carrying Russian oil are owned by Greece; London is home to the largest marine insurance companies in the world.

On Tuesday, the Treasury Department issued new guidance explaining that Russian oil sold under the cap but then “substantially diverted” or processed outside of Russia will no longer be subject to sanctions. It also introduces a “safe harbor” provision that protects insurers and other financial service providers from liability if they violate sanctions based on false information about oil prices in shipping transactions.

Some EU diplomats, particularly those from Poland and other staunch Ukrainian allies, said the price range proposed by the G7 was too high and that the ceiling should be lowered significantly to hurt Russian revenues, while several EU diplomats were directly involved or informed. had given it is said in the negotiations.

Greece, Cyprus and Malta, which have a significant stake in the policy because of their large maritime industries, wanted an even higher limit – which would actually put the price above current trading levels – and some even wanted compensation for possible revenue loss. their maritime business.

France, Germany and Italy, the three EU countries that are members of the Group of 7 industrialized nations that govern the Russian oil price ceiling, have spoken in favor of the proposed price range and softer enforcement mechanisms, defending the US position and arguing that they are necessary. avoid a supply crisis.

Russia has said it will not comply with the official price ceiling; setting it around the current market price would allow it to keep its face and continue to export.

The embargo imposed by the European Union on Russian oil on December 5 also includes a ban on European services for the transportation, financing or insurance of Russian oil to destinations outside the bloc. the world.

Below the price cap, these European shipping providers will only be allowed to ship Russian crude outside the bloc if they meet the shipping cap. In other words, it would be up to them to ensure that the Russian oil they carry or insure is sold at or below the specified price; otherwise, they will be held legally responsible for violating the sanctions.